HR strategy is a major factor in building profits

According to a major new study by research organisation PIMS, HR accounts
for 15 per cent of profit performance.

The figure is based on responses from 5,000 managers in profit-making
businesses, and looks at the impact of HR on the bottom line.

The study breaks HR’s contribution down into several areas.

It finds that a well-run, professional appraisal system can improve the
performance of individuals and subsequently the profitability of the business.
However, there are as many badly-run formal appraisal systems – which have no
benefit to the business – as there are well-run appraisal systems.

PIMS managing director Keith Roberts said the study shows the importance of
management training. "The research demonstrates conclusively that
significant time spent on management training programmes improves profitability
considerably and is an important catalyst for change," he said.

Duncan Brown, assistant director general at Chartered Institute of Personnel
and Development, said the findings back up previous studies.

"There is a ton of data now that shows that HR affects
profitability," he said. "HR directors need to stick this information
in their chief executives faces."